Ten Miles Square


September 20, 2012 3:45 PM Health Care Is Expensive, Even for Those on Medicare

By Aaron Carroll

We like to think that Medicare is an incredibly comprehensive health care insurance program that protects seniors from financial hardship due to health related issues. But what are out-of-pocket costs for the elderly? A new study in the Journal of General Internal Medicine examined just that:


A key objective of the Medicare program is to reduce risk of financial catastrophe due to out-of-pocket healthcare expenditures. Yet little is known about cumulative financial risks arising from out-of-pocket healthcare expenditures faced by older adults, particularly near the end of life.


Using the nationally representative Health and Retirement Study (HRS) cohort, we conducted retrospective analyses of Medicare beneficiaries’ total out-of-pocket healthcare expenditures over the last 5 years of life.


We identified HRS decedents between 2002 and 2008; defined a 5 year study period using each subject’s date of death; and excluded those without Medicare coverage at the beginning of this period (n = 3,209).


We examined total out-of-pocket healthcare expenditures in the last 5 years of life and expenditures as a percentage of baseline household assets. We then stratified results by marital status and cause of death. All measurements were adjusted for inflation to 2008 US dollars.

We all know that end-of-life care is expensive. This study looked at the last 5 years of people’s lives on Medicare, specifically at out-of-pocket spending. The average amount spent in those years was $38,688 for individuals, and more than $51,000 if the subject was part of a couple. However, there was a skew in the data. The median amounts of spending were $22,885 for individuals and $39,759. This means that a number of people spent a whole lot of money. In fact, ten percent of both individuals and spouses spent upwards of $90,000 on health care in the last five years of life.

That’s out-of-pocket. That’s on Medicare.

For individuals, the amount spent was more than baseline household assets for one in four people. More than two in five individuals spent more than the value of their non-housing assets.

Health care is amazingly expensive in the United States. There are days I don’t know what else to say.

[Cross-posted at The Incidental Economist]

Aaron Carroll ,MD, is an associate professor of Pediatrics and the associate director of Childrens Health Services Research at Indiana University School of Medicine.
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  • Barbara O'Brien on September 20, 2012 8:12 PM:

    The biggest drain probably is for long-term non-hospital care. This would include nursing homes, assisted living facilities, and in-home living assistance. This is hugely expensive -- the average cost of r a semi-private room in a nursing home is about $200 a day. And most people who reach retirement age will need such assistance eventually.

    Medicare pays for very little of these long-term care bills, so seniors are on their own. Once they've paid down enough of their assets they qualify for Medicaid. What we really need is some kind of public long-term care insurance.

  • Dennis Byron on September 21, 2012 5:32 AM:

    This article is total navel gazing by a guy who doesn't understand Medicare. (Of course, I wouldn't expect him to. According to the bio, he's a doctor; he's a pediatrician, and he's a government employee--meaning he probably won't ever have to deal with Medicare directly because he will receive government retiree insurance.)

    Despite his first sentence, NO ONE who is on Medicare likes

    "to think that Medicare is an incredibly comprehensive health care insurance program that protects seniors from financial hardship due to health related issues."

    It is only Democratic activists like the author who like to think that way. Medicare's out of pocket issue has only a little to do with end of life issues. For a relatively healthy 67-year-old, Medicare Parts A and B ("Medicare as we know it" as people like the author like to call it) is terrible insurance. Not only does Medicare lack long-term-care protection as another commenter wrote, but it lacks catastrophic coverage, the most important thing insurance should have. And not only does Medicare Parts A and B lack catastrophic coverage, at the other end of the protection scale "Medicare as we know it" has very high co-pays and deductibles so the author's "incredibly comprehensive health care insurance program" unbelievably combines the two characteristics that define the worst insurance ever designed: lifetime limits AND high out of pocket costs.

    Again, I am not talking end-of-life out of pocket costs. A relatively healthy 67-year-old pays for his or her healthcare five different ways and only one of them involves "Medicare as we know it" directly.

    1. He or she pays for Medicare Part A through 45 years of payroll taxes (if retiring now)
    2. He or she initially pays for Medicare Part B through 45 years of income taxes
    3. He or she continues to pay a Medicare Part B premium of $100 a month in 2012 (higher if high income; waived if making less than about 150% of FPL in retirement)
    4. Over 80% of Medicare beneficiaries "choose" to pay $100-$400 more per month for additional private supplemental insurance from Medicare itself (Parts C and D), former employers, or as individuals to make up for some of the deficiencies in Medicare Parts A and B noted above (varies by county and by benefits provided by the supplemental insurance)
    5. He or she still pays large amounts out of pocket not only for Medicare Part A and B co-pays, co-insurance and deductibles (depending on the terms of the supplemental insurance) but for things that none of the above usually covers such as dental and aural expenses and for healthcare coverage outside the United States

    We need Medicare Reform now but you won't hear that from the author.

  • Barbara O'Brien on September 21, 2012 8:53 AM:

    I find Mr. Byron's comments odd. First, if he is suggesting that Medicare recipients don't like Medicare, it appears he is mistaken. A recent survey found that a majority of Medicare recipients are satisfied with their insurance coverage, and in fact are more satisfied than younger people with commercial insurance.


    The fact that a large majority of Medicare recipients have some kind of supplemental coverage is not an indication that there's something wrong with Medicare. A lot of countries run their national health care systems that way, providing a basic insurance package to all citizens but allowing people to purchase supplemental coverage from private companies. It's a middle way between the extremes of the government paying for everything a senior might want (too expensive) and not providing health coverage at all (bye bye grandma).

    I'm very puzzled about the comment about catastrophic care. I know Congress failed to pass a Medicare catastrophic coverage bill back in 1988; that bill would have expanded Medicare benefits to include outpatient drugs and limited enrollees' copayments for covered services. But now the drug part is covered, and a lot of co-payments for common services have been eliminated. Some other Medicare co-pays are lower than what I'm paying now for a private group insurance plan. Hey, things are tough all over.

    There are some kinds of costs that still hit seniors hard, but most of those costs are associated with long-term care, whether in a nursing facility or in the home. Medicare won't pay for hospital "observation" stays, either, so seniors have to be sure that's not on their paperwork if they're admitted to a hospital.

    The fact is, if there were no program such as Medicare, seniors would have to pay many, many times more than what they're paying for Medicare, assuming they could get coverage at all. Most probably couldn't. Yes, many things about Medicare could be improved, but the basic structure of the program appears to be working pretty well.

  • paul on September 21, 2012 9:43 AM:

    Is end-of-life the appropriate period to look at this question?

  • schtick on September 21, 2012 6:26 PM:

    The sad part about Medicare is the stuff that isn't coverage because some idiot in Congress thought it was stuff that shouldn't be covered because it's "cosmetic". Like someone that is diabetic (like me) who finds a big black spot on their toe and goes to a podiatrist to find out I have to pay out of pocket because the ONLY way the government will cover a visit to a podiatrist is if I have NO PULSE in my foot.
    Then I had to pay out of pocket for a skin tag on my neck that kept catching on my clothes and would bleed all over. Thankfully, I'm on SSI and Medicare so I'm rich and can just toss out the clothes I bled all over and buy new ones.
    And then Medicare part D. What a hoot. It goes up every year whether or not there's a cola and usually the cola doesn't cover the rise in part D.
    Let's just stop the crap and have universal health care. People in government don't know thier ass from a hole in the ground and shouldn't be making these calls. And calls that have anything to do with the medical field.
    When they say that birth control is about sex and viagra is medical, you know which end they are thinking from.